The bear statue in front of the New Stock Market in Frankfurt. / Heiko Wolfraum via AP

by John Waggoner, USA TODAY

by John Waggoner, USA TODAY

Sometimes, you get worried for perfectly justifiable reasons - like, for example, when you open your basement door and the furnace tells you to get out.

Other times, you can get nervous when things seem to be going a bit too well. For example, if you've checked your mutual funds statement, you've probably done pretty well this year. Given the market's penchant for evil the past dozen years or so, your good fortune may seem unsettling.

What should you do? Most times, following your gut isn't a good idea. Because you're acting on fear, rather than a well-thought-out investment plan, you're likely to get burned. In many cases, acting on those fears will cost you more than taking your lumps in a bear market.

Consider bear market funds. In Wall Street parlance, if you're betting that stocks will rise, you're long. If you're betting that stocks will fall, you're short. It stands to reason that if you think the market will plunge, you should be short. And that's what bear-market funds do: They rise when the stock market falls, and vice versa.

The fund industry has rolled out dozens of exchange traded funds that allow you to bet on a falling market. Consider one of the oldest bear market funds on the market, the Rydex Inverse S&P 500 Strategy fund (RYURX). The past 15 years, the fund would have turned a $10,000 investment into a $4,100 investment.

Despite all the wrenching bear markets, the S&P is considerably higher than it was 15 years ago, especially if you reinvest dividends. A $10,000 investment in the Vanguard 500 Index fund, which tracks the S&P 500, would be worth about $22,000 now.

Naturally, few people are perma-bears, although several people do seem to make a living telling others to be. Would it have helped if, say, you put $1,000 into the Rydex bear fund and $9,000 into the Vanguard 500 fund? Nope - although it wouldn't have hurt much, either. You'd have $20,222

Suppose, then, you rebalanced your bear fund and your bull fund every quarter to make sure that you always have 10% in the bear fund. That helps - but not a lot. You'd have about $20,500 in return for a fair amount of annoying (and potentially costly) transactions.

Now, all back-testing depends on the points at which you begin and end, so it's entirely possible that adding a bear fund somewhere along the line would have improved your performance, and that your gut could have led you to choose the correct point. It's also entirely possible that you could have gone short when you should have gone long, and managed to hurt yourself twice.

An interesting variant is long-short funds, which mix bets on stocks they like with bets against stocks they hate. A few funds have done quite well in the past five years, but you need to investigate each one individually.

For example, Hundredfold Select Alternative fund uses a variety of short-term trading strategies, including short selling. It also includes a big slug of high-yield bonds, which is a polite term for junk bonds. Currently, the fund has 46% of its assets in high-yield bonds, with the bulk of the remainder in various stock-trading strategies.

Guggenheim Alpha Opportunity takes a mixed approach as well, keeping about a third of its assets indexed to the S&P 500, while taking a long/short approach to both U.S. and international stocks. Both funds are startlingly expensive: Hundredfold charges 2.10% a year in expenses, and Guggenheim charges 2.11%, according to Morningstar. That's a pretty big weight for investors to bear.

Two more reasonably priced - but still not cheap - funds are Wasatch Long/Short and Forester Value. The Wasatch offering has beaten the Standard & Poor's 500-stock index the past five years with relatively low volatility. Its expense ratio, at 1.27%, is low for the category and about average for actively managed funds.

Forester Value is a defensive fund, and longtime manager Thomas Forester doesn't hesitate to load up on cash. The fund actually posted a gain in 2008, a kidney stone of a year for stock funds.

By and large, the fund is more of a true value fund than a long/short fund: Forester builds up cash when stocks are expensive and deploys it when he finds bargains. The fund does use modest short positions, however. And its 1.28% expense ratio makes it competitive with Wasatch's offering.

Schwab Hedged Equity has trailed the S&P 500 the past five years, and its 1.53% expense ratio is nothing to write home about. Nevertheless, it does offer low volatility for those worried about big bumps.

Before you buy any fund that offers protection from a bear market, take a look at your overall portfolio. If you have money market funds and bond funds, your stock exposure is probably not as huge as you imagine.

And if you are nearly 100% in stocks, consider moving some money into money market funds or selected long-short funds to calm your nerves. You'll probably earn less money in the long run, but you won't wake up drenched in sweat every night. And you'll probably do better than if you start playing with the bear funds.